by Ann Charles
It’s impossible to discuss the role of Corporate Social Responsibility (CSR) in today’s business without acknowledging the elephant in the room. The economic collapse that began in 2007 was largely the result of a colossal failure of leadership in both the finance industry and the U.S. government. The once venerable investment banking industry has devolved into an unsupervised and unregulated market, a giant that casts its dark shadow over the entire economic system. And while most of us are still wading through the debris of the Great Recession, Congress has yet to enact any truly game changing regulation, and Wall Street compensation still incongruously exceeds the pay of today’s brain surgeons.
For a comprehensive history of how we got here, watch the film Inside Job, but here is the abbreviated version: The banking community created complex high risk financial instruments whose singular purpose was to drive maximum short term profits. The government did nothing to protect us, except to determine that tax payers must bailout these companies that were considered too big to fail. The credit crisis, the housing market collapse, illegal foreclosures and long term unemployment ensued, while the banks continue to thrive, rewarding themselves with lavish pay and bonuses.
So where did this dichotomy come from? How did it happen that the goals of investment banks are in direct conflict with the health and well-being of the entire economic system? And how can we reconcile the profound gains achieved on Wall Street with what Umair Haque calls America’s “jobpocalypse“?
Mr. Haque makes the point in The Capitalist’s Paradox that what’s standing in the way of great capitalism today might just be yesterday’s capitalists–“trying at every turn to stifle competition, squelch information, earn an unfair advantage, and extract value from people, nature, and the future, instead of creating authentic, thick, shared value for them.”
I cannot disagree. But I would also add that for those of us who work in the world of CSR, it seems unfathomable that an industry as powerful as Wall Street would continue to operate in such a self-serving and destructive manner. Every day, we see examples big and small of how a new culture of business leadership is emerging, one in which corporations resolve to instill positive values and evaluate the long term effects of every decision they make. CSR broadens the definition for business success, raising the bar to include the Triple Bottom Line: People, Planet and Profits.
In order to successfully integrate CSR into business, we have to start by changing the culture of Wall Street, and that change has to come from within. There are some bright spots in the leadership of the financial sector, these are key individuals who are mindful of the impact that their business has on the world around them. By showcasing these game-changers in our conferences and including them in our conversations, we can shine a light on those working tirelessly to change the rules of the game. Bill Ackman is a good example. Mr. Ackman is the billionaire founder of hedge fund Pershing Square Capital, and a very outspoken critic of the conflict of interest at the ratings agencies. Mr. Ackman continues to call out the corruption in the ratings process and offers solutions to fix the very unhealthy dynamic between the rating agencies and the investment banks. Mr. Ackman is also a philanthropist; his Pershing Square Foundation provides grants to entrepreneurs who facilitate change in education, global health care, poverty alleviation, and human rights.
There are other values-based finance leaders who are working to build transparency into the investment banking business. David Blood, of Generation Investments, is a pioneer working to transform the culture of the financial industry for the better. Mr. Blood is a proponent of Sustainable Capitalism, a movement which seeks to maximize long-term value creation, by integrating environmental, social and governance (ESG) factors into investment strategies. Likewise, Jacques-Philippe PivergerGlobal Syndicate of Pinebridge Investments is an inspirational leader and a serial social entrepreneur, doing selfless work for the and the Haiti Project. On the business side, there is Curtis Ravenel, Global Head of Sustainability at Bloomberg. Curtis is a pioneer in ESG investing who is leading Bloomberg’s push for corporate sustainability and responsible investing.
Wall Street has always claimed to attract “the best and the brightest” young talent to their industry. If true, then this is very good news, because many of today’s brightest graduates are expressing an interest in careers that create social and environmental value, along with financial profitability. Just two years ago, nearly 20% of the Harvard graduating class signed “The M.B.A. Oath,“ a pledge that M.B.A.’s will act ethically, and refrain from advancing their “own narrow ambitions” at the expense of others. Perhaps the young graduates themselves will transform Wall Street by rejecting a scorched earth investment strategy, in favor of one that has a foundation in social responsibility. Let’s hope that this movement becomes a beacon that is bright enough even for Wall Street to see.
Ann Charles is CEO of BRANDfog, offering social media and Corporate Social Responsibility strategy for CEOs.